Key investment points: Reached a strategic cooperation with New Oriental's online education website to jointly build an early childhood education brand. The company announced on September 22 that Shengshi Hotsun, a wholly-owned subsidiary of the company, and New Oriental Express, a professional online education website company under New Oriental Education Technology Group, signed a “Comprehensive Strategic Cooperation Framework Agreement”. Xuncheng is one of the first professional online education websites in China, dedicated to providing users with a personalized, interactive and intelligent online learning experience; Shengshi Hotsun specializes in the integration and operation of preschool education, animation, film and television new media programs, has a huge library of film and television content resources, and has leading animation and child education content resources in the country. Through animations, early education programs, and animation IPs that Shengshi Hotsun provides advantages, Xuncheng develops related courses based on some animation IPs, and cooperates in providing advantageous early education courses to jointly build a jointly operated early education brand. Integrate content with teachers to further expand the field of children's business. We believe that the cooperation between Shengshi Hotsun and Xuncheng is conducive to in-depth exploration of the company's content value, channel value, and promotion of derivatives sales: 1) Exclusive content and strong teachers to create a digital classroom for early education. Shengshi Hotsun has exclusive broadcasting rights for a large number of high-quality movies, TV dramas, children's animations, and preschool education content in mainland China. Through the strong teaching staff of New Oriental, Shengshi Hotsun's massive animation IP and preschool education products can be adapted into children's products such as courseware, picture books, etc., extending IP value and creating a characteristic early childhood education brand. 2) Online and offline channels promote the field of early childhood education. Shengshi Hotsun has new media distribution channels all over the country and television broadcasting platforms in cities and counties at all levels, covering more than 400 million users; Xuncheng's New Oriental online registered users have reached 20 million. The collection of TV, the Internet, and offline education in New Oriental can cover more target customers, create an integrated online and offline early education model, enhance user stickiness, and expand monetization channels. 3) The company's children's derivatives can be promoted through the New Oriental offline platform. In 2016, the layout of the children's industry continued to move, making every effort to integrate existing animation preschool education resources. 1) Shengshi Hotsun signed a contract with CIBN to increase the construction of the entire industry chain. The company signed a contract with CIBN's hardware company to cooperate on content and customized hardware in the future, and continue to build an all-media operating platform centered on animation and preschool education content. 2) Sailing Huangshi Fund participated in the privatization of Wanda's business, with the goal of laying out the preschool education industry. Sailinghuang Foundation, a subsidiary of the company, participated in the privatization of Wanda with the aim of establishing preschool education in Wanda's business circle. The company has set up a pilot early childhood education project in Beishangguang, and is currently operating well. 3) Establish a comprehensive preschool education channel network and build a high-quality preschool education content platform. The vertical preschool section set up by the company “Grow with You” has covered more than 20 provincial operators, more than 100 prefectures and cities, and nearly 1,000 county-level stations across the country, forming a cross-media broadcast network. At the same time, the effective integration of growing with Bihai Yinfan will directly enter offline kindergarten chains, providing strong channel resources for Huangshi Group to strengthen the layout, products and services of preschool education content and children's derivatives. 4) Reached a strategic cooperation with Qihu 360 and reached collaboration in the three areas of content, channels, and joint development. After combining 360's huge traffic resources, technical advantages, and the development and operation of children's smart products, the company is expected to open up a new vertical precision children's entertainment and education platform in the children's market, achieve one-stop promotion, and finally achieve the market strategy of “children's content+vertical precision portal+all-media platform+multi-terminal linkage+intelligent safety products”. Profit forecasting and valuation. We expect the company's EPS from 2016 to 2018 to be 0.50 yuan, 0.62 yuan, and 0.77 yuan, respectively. Referring to the consistent PE expectations of companies in the dairy industry and media industry in 2016, 20 to 85 times and 32 to 80 times, we gave the company's dairy and media sector a valuation of 40 times and 50 times in 2016. At the same time, combined with the 16 mid-year report dairy industry (62%) and media (31%) in the main business, we gave the company 43 times PE in 2016, corresponding to the target price of 21.50 yuan, and gave it an increase in holding rating. Risk warning. Synergies fell short of expectations; film, television, and preschool education businesses fell short of expectations.